Whole Life Insurance

With whole life insurance, you pay your premiums for an agreed-upon rate throughout your lifetime which makes it possible for you to build up a cash value. This cash value could be used as collateral against an additional policy or loan if necessary. You also receive guaranteed coverage no matter what happens because the premiums are locked in. A benefit of this type of policy is that your insurance coverage will never decrease. You can also borrow money from the policy, but you'll need to be aware of the interest rates associated with these loans.

Whole-life policies are typically more expensive than term policies because they last for your entire lifetime and also cover funeral costs. A whole life policy's expenses like commissions and administrative fees tend to be higher than a term policy's expenses. This means that when it comes time to collect benefits in the future, there may not be sufficient funds or assets in the account to pay them.

Benefits of Whole Life Insurance:

1. Both term and permanent types of coverage in one policy

A lot of people only think about term life insurance when they're looking into coverage options. What a lot of these same people don't realize is that whole life insurance can be a great choice as well. Whole life combines the best of both types of coverage into one policy, and it's actually more affordable than you might expect.

Whole life insurance offers lifetime protection for your beneficiaries, but it also builds cash value over time. This cash value gives you guaranteed coverage for life, but it also helps you save money and plan for the future.

2. You can use the cash value to manage your tax burden

One of the biggest benefits of whole life insurance is that it builds cash value over time. This cash value allows you to purchase more coverage anytime in your life but it can also be used in a variety of ways.

One great use of the cash value is to help manage your tax burden. This can really come in handy if you hold a lot of other investments that could potentially raise your taxes drastically. If you choose, you can even take out loans against the policy and withdraw funds from it as well which also helps lower your tax bill.

3. The premiums stay level for life

One of the biggest benefits of whole life insurance is that it offers fixed premiums for your entire lifetime. This means that the premium will never go up, no matter how old you are or what your health condition might be.

Insurance companies love to do this because they know that older people and those with health conditions (who may need more coverage) will likely cost them a lot more money. Because of this, they charge everyone the same premium until their policy expires or they pass away.

4. You can qualify at any age regardless of your health condition

You might not be able to get term life insurance if you're over a certain age, or if you have less than ideal health. This is because your eligibility for coverage depends on many different factors, and insurance companies use them to determine how likely it is that you'll need to make a claim.

But whole life insurance works differently: no matter what your age if you can afford the premiums, you can get a policy. Even if you have a medical condition, it's still possible to qualify as long as your health isn't too bad and you can afford the coverage.

5. It offers guaranteed life-long protection

Although term insurance is much more popular, whole life insurance is actually the better option for many people. The biggest reason why is because it offers guaranteed protection for life.

If you opt for term life insurance, then your coverage will end when the term expires-even if that's only a few years from now. This is why you'll usually need to renew your policy every 10 or 20 years. But with whole life insurance, this isn't the case: the coverage never expires, so you just pay the premiums until your later years. And although term life insurance is much more affordable than whole life insurance, it's not necessarily better for everyone-especially if you plan to hold the policy for many years, don't want or need cash value in your plan, or want guaranteed protection for life.

Whole life insurance offers the best of both types of coverage in one policy. It builds cash value that you can use to manage your taxes, but it never increases your premiums or expires regardless of how old you are or what your health condition might be. And because the coverage is guaranteed for life, you'll never have to worry about running out of protection.

Term Life Insurance

With term insurance, you choose a specific time frame for which you want coverage so if you die within this timeframe your benefit will go to your beneficiaries. Term insurance is generally less expensive than whole life because it's only in effect for a certain amount of time, hence the term.

Because term policies are not guaranteed to last your entire lifetime, they don't build up cash values over time. The premiums are also lower than with whole life insurance which means that there are fewer expenses built into the policy overall. Because you choose an expiration date when you buy this type of coverage, your premium is paid until that date arrives. You can purchase multiple consecutive terms or one large chunk of coverage depending on what works best for your needs and budget.

Benefits of Term Life Insurance

By the time you reach 40, you may have a spouse and children that rely on your income. You also need to provide for your family's well-being if something happened to you tomorrow. While saving money, paying off debt, and purchasing life insurance are all important financial goals, term life insurance should be a top priority for many families. Here are five benefits of term life insurance.

1. Term life insurance is inexpensive 

Because the policy's tenure is short, premiums are often much lower than other types of policies. For example, a 35-year old may be able to purchase a 20-year term life insurance policy for as little as $1 per day. You can save even more on your premiums by taking advantage of discounts on term life insurance policies.

2. Term life insurance offers affordable coverage 

You can choose the amount of coverage you need at a price that fits within your budget. Term life insurance is typically used to replace lost income, which is why it's often called income replacement or loss of income protection. Families who have dependents that rely on their income should consider purchasing term life insurance.

3. Term life insurance is flexible 

You can choose how long you want to pay premiums for the coverage, which provides flexibility if your financial situation changes. The policy can also be changed or canceled at any time.

4. Term life insurance offers convenience 

It's easy to obtain term life insurance, and you can pay premiums at your convenience. Is it time for a new phone plan? Do you want to splurge on dinner out tonight? Term life insurance makes it easy to take care of this important financial obligation because you won't have to worry about missing a payment.

5. Term life insurance provides tax benefits 

You can deduct term life insurance premiums on your income taxes if you itemize deductions. If the policy is owned by an individual, it qualifies as a tax deduction. If the policy is owned by a business, it's considered an operating expense and can help lower your company's taxable income.

Conclusion

Whole life policies cover you throughout your lifetime while term insurance covers you for a specific timeframe. Both types have their own advantages and disadvantages which means there is no clear-cut winner. With that said, knowing your options and understanding the financials behind each plan will help you make an informed decision about which type of coverage is best suited for your particular situation.